Increased risk of politically motivated oil blockades in Libya

Summary: As previously covered in the LIBYA DESK Energy Insights Report #17 and LIBYA DESK Weekly Report #36, institutions at the helm of Libya’s energy sector have been steadily dragged deeper into the country’s divisive politics. However, the latest political escalations further fuel the threat of a politically-motivated blockade. At LIBYA DESK we have been constantly monitoring signs of a partial or complete oil blockade, and we have recorded steadily increasing risks that point to localised grievances being used as a cover to start a potential blockade.?

A closer look: The events of the past few weeks have questioned the ability of oil and gas exports in Libya to maintain the same levels of operation, giving the palpable tensions brewing across the country. Demonstrations in cities with oil and gas facilities across the country continue, casting blame on the NOC leadership for their inability to follow through with promises made earlier this year. One of the latest demonstrations was in Jalu early this week accusing the NOC Chairman Farhat Bengdara of stalling and of making false promises that have yet to materialise. The demonstrators threatened to take action if their demands were not met at the earliest. Furthermore, according to our sources, there have been meetings between the Petroleum Facilities Guard (PFG), tribal leaders, and the Fezzan Anger Movement to discuss a potential blockade. Sources inform us that the statements being made are all too familiar, that they are unhappy with the status quo and that measures need to be taken to address the unfairness shown towards them, particularly the south and east, with unfair distribution of public funds and underdevelopment. Once again, it appears that local groups in eastern and southern Libya are blaming the Tripoli-based GNU for its shortcomings to these communities. In this context, it seems clear that the LNA and its allies have been laying the groundwork for another blockade, with Haftar hinting that the south cannot stay quiet any longer, as was seen with his latest tour of southern cities. These actors are once again using genuine frustrations from these communities to push for another politically motivated blockade.

Go deeper: As covered in previous LIBYA DESK reports, the politicisation of the oil and gas sector has reached new levels, a trend which will likely continue to prompt some actors to once more follow through with their threats by blockading much needed resources like oil, gas, electricity, or even water. Turkey's recent moves, such as the reported use of drones and signing of energy deals, are an indication that further escalation might happen in Libya on all levels. At present, it is difficult to see how there could be a solid foundation for a renewed political process and how escalation could be averted. Moreover, the tacit agreement that was reached behind the scenes by the Dabaiba and Haftar families over the July oil blockade’s lifting appears increasingly unsustainable. In fact, there are clear indications that GNU PM Abdulhamid Dabaiba is going far beyond what was envisaged by the deal, therefore angering Libyan National Army (LNA) Commander Khalifa Haftar and increasing the likelihood of a politically motivated blockade. The overall atmosphere in Libya indicates that tensions are running high. Haftar’s rhetoric during his tour of the south over the past few weeks demonstrates his growing frustrations towards politics and could signal a return to military means. The LNA’s recent military parade in the southern city of Sebha was an event riddled with symbolism. The parade’s location reminds us of when Haftar launched his military campaign in 2019, and will probably raise alarm amongst his opponents in western Libya. It is likely that the anti-Haftar camp will use the parade as a means to escalate their rhetoric and to galvanise their own support base so as to prepare them for what may be yet another war. These domestic dynamics are coupled with Egypt hardening its position against the GNU and the question of Abdulhamid Dabaiba’s legitimacy.?

The role of the Higher Council for Energy (HCE): As mentioned in our previous Energy Insights report, the GNU’s Decision 790 reactivated the Higher Council for Energy (HCE), which reports directly to the PM and gives him supreme authority over Libya’s oil and gas sector. Although the NOC Chairman has a chair at the HCE, its reactivation means that he is left with little executive power as the HCE’s head will have the final say on development budgets, decisions on concessions, output, exploration and export policies, and overall management of the NOC, its subsidiaries and foreign partners. Of note, the HCE was initially formed in 2009 to decrease the powers of the NOC Chairman but was never activated after the fall of the Gaddafi regime. In addition to Dabaiba, clear winners from the decision are Central Bank of Libya (CBL) Governor Sadiq al-Kabir who will have more control over oil revenues and Oil & Gas Minister Mohamed Aoun who continues to assert himself as Libya’s energy kingpin. For example, Aoun has put brakes on the signing of several important contracts with international oil companies, particularly as a result of his protectionist and nationalistic creed that pushes him to seek buy-backs in terms of oil fields. He also has opposed the adoption of a financial mechanism to oversee the fair distribution of the country’s oil and gas revenues, saying that such a mechanism would divide and destabilise the country.

The big picture: In this situation, NOC Chairman Farhat Bengdara is in a difficult position. He has had to downplay the seriousness of Decision 790 to his backers in eastern Libya, but knows well that he has quietly become a paper tiger figure in the oil and gas sector. The Haftars, particularly Saddam Haftar who was at the forefront of the earlier deal to appoint Bengdara, see the reactivation of the HCE as a betrayal of sorts. Sources have told LIBYA DESK of a recent divergence in opinion between Bengdara and Saddam Haftar, as they are not seeing eye to eye on how to respond to recent developments. Saddam is of the opinion that Bengdara and the NOC should take a more aggressive position on the recent signing of the MoU, while Bengdara is arguing that they should calmly navigate this development. This can only mean greater risk of oil blockades in the coming weeks. Indeed, Petroleum Facilities Guard (PFG) units have already threatened to close Sidra, Harouge, and Ras Lanuf ports in the east of the country unless the NOC increases their salaries. Albeit unrelated to the current politicisation of the oil and gas sector, there is also the case of Abdullah Senussi, a former Gaddafi-era Intelligence Chief who is in the custody of western Libyan armed groups and is in need of medical assistance. Members of his tribe, the Mgerha, have considered imposing a water blockade, something that the LNA is likely to use as a means to pressure the GNU. In late September, the Hassawna Water System of the Man-Made River Authority (MMRA) had already registered water leakage in its room 528 near the city of Bani Walid due to sabotage acts. These two cases may be completely unrelated, but the fact remains that Libya’s oil, gas, and water infrastructure are now heavily at risk of being disrupted to put pressure on a GNU which has used energy revenues without much supervision and whose key actors are perceived as monopolising a sector that is ultimately the sole breadwinner of the Libyan state.

This article is an excerpt from our Energy Insights series, a bi-weekly product developed by LIBYA DESK? to help clients navigate Libya’s energy markets.?

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